Scope of Application
- Applies to entities under IC jurisdiction:
- Group A: Insurance companies, reinsurance companies, mutual benefit associations.
- Group B: Insurance/reinsurance brokers, general agents, charitable trusts.
Key Definitions
- External Auditor: Individual practitioner or signing partner.
- Auditing Firm: Entity engaged in public accounting/audit reports.
- Fraud: Intentional acts reducing company assets by 5% (e.g., falsification, asset misappropriation).
- Error: Unintentional mistakes reducing assets by 5%.
- Gross Negligence: Reckless disregard of due care per auditing standards.
- Material Information: Critical info affecting user decisions.
- Audit Engagement Letter: Document confirming audit terms and scope.
- Signing Partner: Responsible auditor signing consolidated reports.
- Entities: All companies under IC jurisdiction.
Accreditation Scope and Limitations
- Only IC-accredited auditors/firms may audit covered institutions.
- Firms accredited for Group A automatically qualify for Group B; individual auditors only Group B.
- Auditor/firm changes or partner rotation required every 5 years or less.
- One-year transition period provided for existing auditors/firms at Circular's effectivity.
- Both partners and firms need IC accreditation.
- IC accreditation does not absolve management/auditors of responsibilities.
- IC bears no liability from auditor selection by companies.
- Accreditation expires after 3 years unless renewed with timely application.
- Mutual recognition upheld among IC, BSP, SEC for certain categories.
Qualification Requirements
- Individual auditors must have BOA accreditation and 5 years audit experience.
- Must have quality assurance procedures in place.
- Required notarized certifications confirming no conflicts of interest or disqualifications.
- Specific insurance audit experience required or attendance to recognized insurance audit seminars.
- Auditing firms require BOA accreditation, at least one qualified signing partner, and established quality controls.
Application Procedures for Individual Auditors
- Submit notarized form IC Form A with:
- Valid BOA certificate
- Proof of audit experience
- Quality manual and procedures
- Notarized compliance undertakings
- Seminar attendance certificates
- Audited financial statements of top clients
- Renewal possible within 60 days before expiry via Form A-R, including updated documents and seminar compliance.
- Accreditation fees: P2,000.
Application Procedures for Auditing Firms
- Submit notarized form IC Form B by managing partner with:
- Valid BOA certificate including partners list
- Quality assurance manual
- Latest audited financial statements of largest clients and firm
- Renewal within 60 days with Form B-R plus updates if any.
- Accreditation fees: P5,000.
Mutual Recognition for Group B Auditors
- Auditors already accredited by SEC or BSP for Group B can present BOA certificates and proof of experience or seminar attendance.
Operational Requirements
- Prohibited non-audit services affecting independence include bookkeeping, IT systems design, appraisal, actuarial, internal audit outsourcing, management advisory, legal expert services etc.
- Obliged to comply with engagement terms, auditing standards, ethics, and pertinent laws.
- Quality control policies must be maintained and reported to IC on amendments.
Reporting Obligations
- Mandatory report to IC within 30 days on:
- Material fraud or errors
- Under-reserving leading to capital deficiencies
- Financial inadequacy to cover liabilities
- Material internal control weaknesses
- Termination or resignation with reasons
- Breach of laws or IC regulations
- Corporate governance issues requiring IC action
- No matters to report requires a notarized negative certification within 15 days post audit.
- Management informed of adverse findings and can participate in discussions unless fraud involvement is suspected.
- Auditors protected from liability for IC disclosure under contract provisions.
Delisting and Suspension Grounds
- Failure to report as required.
- Loss of independence but continuing audit.
- Willful misrepresentation in accreditation or reporting documents.
- BOA disciplinary findings or conviction for crimes involving moral turpitude, fraud, or regulatory violations.
- Refusal to comply with IC investigations.
- Gross negligence or failure to comply with auditing standards.
- Dissolution of firm unless for partner admission with reinstatement.
- Involvement in accounting/auditing scandals with sanction severity based on impact.
- IC to inform BOA, SEC, BSP of violations affecting accreditation.
- Sanctions by IC do not preclude penalties by other regulatory bodies.
- Revocation by BOA automatically revokes IC accreditation.
- Previous conflicting provisions superseded.